FOR  RELEASE  MONDAY,  APRIL  13. 

^•u 


New  Haven,  Conn.,  April  11,  1914. 

To  the  Stockholders  of  the  New  York , New  Haven  and 
Hartford  Railroad  Company: 

In  view  of  the  questions  to  be  voted  upon  by  the  stock- 
holders at  the  special  meeting  to  be  held  in  New  Haven  on 
April  21,  1914,  particularly  that  relating  to  the  proposed 
agreement  with  the  Attorney-General  of  the  United  States, 
to  which  your  Directors  unanimously  recommend  your  ap- 
proval, the  following  statements  submitted  so  that  the 
stockholders  may  have  information,  not  only  about  the 
proposed  agreement  but  also  as  to  the  general  situation 
confronting  the  Company  at  this  time. 


HOWARD  ELLIOTT, 
Chairman. 


Action  Taken  Since  the  Report  of  the  Interstate  Commerce 

Commission. 

On  June  20th,  1913,  the  Interstate  Commerce  Commis- 
sion made  public  its  report  entitled  "The  New  England 
Investigation  in  the  matter  of  rates,  classifications,  regula- 
tions and  practices  of  carriers”. 

In  that  report,  there  is  the  following  paragraph : 

"What  is  needed  first  of  all  to  improve  the  rail- 
road situation  in  New  England  is  rest  and  an  op- 
portunity for  constructive  work.  There  is  much 
truth  in  the  claim  of  these  carriers  that  they  have 
been  so  occupied  with  investigations  and  so  criti- 
cized by  the  public  that  no  fair  opportunity  has 
been  given  for  the  operation  of  their  railroad  prop- 
erties. No  railroad  management  can  succeed  with- 
out the  support  of  the  public  which  it  serves.  It  must 
never  be  forgotten  that  the  railroad  is  a public 
servant  in  fact  as  well  as  in  name,  and  that  the  ser- 
vice which  it  renders  depends  largely  upon  the 
treatment  which  it  receives  from  its  master.” 

In  an  effort  to  conform  to  the  suggestions  in  the  report 
of  the  Commission,  to  improve  the  general  situation,  and 
with  the  hope  and  belief  that  a fair  opportunity  will  be 
given  for  the  operation  of  the  properties,  the  directors  have 
taken  the  following  action: 

1.  A change  in  the  management  of  the  New 
Haven  Company  by  the  selection  of  Mr.  Howard 
Elliott  and  Mr.  James  H.  Hustis,  who  now  fill  the 
positions  of  Chairman  of  the  Board  of  Directors 
and  President  respectively,  coming  into  the  man- 
agement September  1st,  1913. 

2.  The  selection  of  Mr.  John  B.  Kerr,  on  Sep- 
tember 18th,  1913,  as  president  of  the  New  York, 
Ontario  and  Western  Railway  Company. 

3.  The  selection  of  Mr.  L.  S.  Storrs,  on  December 
24th,  1913,  as  President  of  the  Connecticut  Trolley 
Company. 


1 


4.  The  selection  of  Mr.  A.  E.  Potter,  on  Decem- 
ber 27th,  1913,  as  President  of  the  Rhode  Island  trol- 
ley company. 

5.  The  cancellation,  on  February  1st,  1914,  of 
the  so-called  “traffic  agreement”  between  the  New 
Haven  and  the  New  York  Central  in  regard  to  the 
Boston  and  Albany. 

6.  The  withdrawal,  on  January  24tli,  1914,  by 
the  New  Haven  Company  from  the  Board  of  Di- 
rectors and  the  management  of  the  Boston  and 
Maine. 

The  re-organized  managements  of  these  properties 
with  their  independent  presidents  and  officers  have  been 
perfecting  many  details  of  the  organization,  so  as  to  pro- 
mote efficiency,  safety,  and  every  economy  consistent  with 
the  reasonable  up-keep  of  the  property,  and  to  gain  the 
support  and  confidence  of  the  patrons,  the  public  and  the 
employees  of  the  road. 

Pending  Investigations. 

On  February  7,  1914,  a resolution  was  passed  in  the 
Senate  of  the  United  States,  as  follows : — 

“Resolved,  That  the  Interstate  Commerce  Com- 
mission be  requested  to  make  public  the  facts  in  its 
possession  concerning  the  financial  transactions  of 
The  New  York,  New  Haven  and  Hartford  Railroad 
Company,  anc),  so  far  as  it  may  be  necessary,  to  get 
additional  information  to  thoroughly  cover  the  sub- 
ject, to  re-open  its  examination  of  the  affairs  of  that 
company  and  to  make  a further  investigation  of  its 
financial  transactions,  with  a view  to  ascertaining: 

First.  What  became  of  the  funds  of  said  com- 
pany invested  in  the  various  enterprises  and  cor- 
porations mentioned  in  the  opinion  of  the  Inter- 
state Commerce  Commission,  numbered  twenty- 
three  hundred  and  eightv-four,  case  numbered  forty- 
eight  hundred  and  forty-five,  entitled  ‘The  New 
England  Investigation  in  the  matter  of  rates,  classifi- 


2 


cations,  regulations,  and  practices  of  carriers’,  sub- 
mitted May  twentieth,  nineteen  hundred  and  thir- 
teen, and  decided  June  twentieth,  nineteen  hundred 
and  thirteen. 

Second.  Whether  the  person  or  persons  author- 
izing such  investment  of  the  funds  of  said  company 
and  the  person  or  persons  receiving  the  benefit 
thereof  are  liable  to  punishment  under  existing  laws. 

Third.  Whether  under  existing  law,  such  funds 
so  invested  can  be  recovered  on  behalf  of  the  stock- 
holders of  said  company. 

Fourth.  What  legislation,  if  any,  is  necessary  to 
prevent  the  recurrence  of  similar  transactions.’ ’ 

The  Company  has  been  investigating  some  of  the  sub- 
jects under  inquiry  by  the  Commission  and  all  information 
in  its  possession  has  been  given  to  the  representatives  of  the 
Commission  with  request  that  they  report  promptly.  As 
the  Commission  has  these  matters  in  hand  the  Company 
feels  that  it  should  make  no  public  statement  until  the  Com- 
mission makes  its  report. 

Rules  for  Safety  and  Relations  With  Employees. 

The  North  Haven  accident  of  September  2nd,  1913,  fol- 
lowing as  it  did,  other  serious  accidents,  made  it  imperative 
that  the  rules  and  regulations  of  the  company  be  of  such  a 
character  as  to  safeguard  to  the  greatest  extent  possible 
the  lives  of  the  public  and  the  employees. 

For  some  time  previous  to  this  accident  negotiations 
had  been  conducted  with  committees  representing  the  en- 
gineers and  firemen  to  revise  rules  which  were  not  in  ac- 
cordance with  modern  railroad  practice.  The  new  man- 
agement felt  that  it  owed  a duty  to  the  public  as  well  as 
to  the  employees  to  put  the  new  rules  into  effect  at  once. 
The  engineers  and  firemen  felt  aggrieved  at  this  position  of 
the  company  and  voted  to  strike.  On  October  18th,  1913, 
however,  the  matter  was  adjusted  amicably  with  the  em- 
ployees, and  rules  containing  the  principles  for  which  the 
management  contended  remained  in  effect. 


3 


These  negotiations,  in  the  judgment  of  your  officers, 
tended  to  establish  a better  understanding  and  improved 
relations  between  the  employees  and  the  management,  and 
have  assisted  materially  in  restoring  confidence  through- 
out the  service.  Every  effort  is  being  made  by  officers 
and  men  to  promote  a spirit  of  helpful  cooperation,  so  nec- 
essary to  maintain  and  operate  the  properties  efficiently, 
safely  and  economically,  and  to  give  good  service  to  the 
public. 


The  Immediate  Financial  Situation. 

In  1913  the  Company  had  a very  large  floating  debt,  be- 
cause of  the  Massachusetts  law  prohibiting  any  funded  debt 
exceeding  in  amount  the  paid  in  capital  of  the  Company. 
This  law  was  changed  in  July,  1913,  so  as  to  permit  the 
issue  of  bonds  to  an  amount  equal  to  twice  the  amount  of  the 
capital  stock. 

In  order  to  fund  the  floating  debt  under  this  new  law 
and  to  provide  for  the  purchase  of  steel  passenger  cars  and 
for  other  improvements . the  Directors  in  July,  1913,  ar- 
ranged for  an  issue  of  six  per  cent,  convertible  debentures 
to  the  amount  of  $67,552,000.  to  be  offered  to  the  holders  of 
the  stock  and  the  convertible  debentures  of  the  Company. 
General  financial  conditions  at  that  time  were  not  favor- 
able, and  in  order  to  make  certain  that  the  Company  would 
have  its  money  when  needed  the  Directors  caused  this  pro- 
posed issue  of  debentures  to  be  underwritten.  The  stock- 
holders approved  this  arrangement  at  a meeting  August  22, 
1913. 

The  issue  of  these  debentures  though  opposed  before  the 
Public  Service  Commission  of  Massachusetts,  was  on  Oc- 
tober 14th,  1913,  finally  approved  by  that  commission.  An 
appeal  was  taken  from  this  decision  to  the  Supreme  Court 
of  Massachusetts,  which  on  January  9th,  1914,  decided  that 
the  law  of  Massachusetts  did  not  permit  the  issue  of  de- 
bentures convertible  into  stock. 

There  were  $40,000,000  of  notes  to  meet  on  December  1, 
1913,  and  $5,000,000  of  bonds  on  February  1,  1914.  There- 


4 


Digitized  by  the  Internet  Archive 
in  2017  with  funding  from 

University  of  Illinois  Urbana-Champaign  Alternates 


https://archive.org/details/statementrelatinOOelli 


fore  it  became  necessary  pending  the  decision,  to  borrow  on 
Nov.  18,  1913,  these  sums  and  later  other  amounts  to  pay 
for  new  equipment  and  for  improvements  which  could  not 
be  stopped  or  postponed.  Today  the  company  must  pre- 
pare to  meet  notes  maturing  prior  to  July  26th,  1914,  of 
nearly  $54,000,000  of  which  the  most  important  are  the  6% 
notes  of  November  18th,  1913,  amounting  with  interest  and 
discount  on  May  18th,  1914,  to  $46,550,000. 

Estimated  Results  for  Current  Fiscal  Year. 

The  general  business  conditions  in  New  England  and 
particularly  on  its  railroads  have  been  most  unsatisfactory, 
resulting  in  large  decreases  in  both  gross  and  net  earnings. 
For  the  eight  months  ending  February  28,  1914,  there  is  a 
decrease  in  net  income  of  $4,735,478.83,  compared  with  the 
previous  year,  after  allowing  for  operating  expenses,  taxes, 
interest,  rentals  and  other  fixed  charges.  Based  on  the  re- 
sults for  two-tliirds  of  the  year  an  estimate  has  been  made 
for  the  fiscal  year  ending  June  30tli,  1914,  which  indicates 
that  for  this  period  there  will  be  only  a small  surplus  after 
paying  fixed  charges. 

Reasons  for  Decrease  in  Income. 

There  has  been  a heavy  decrease  in  earnings  due  to  gen- 
eral business  conditions. 

There  has  been  an  increase  in  Transportation  expenses 
due  to  increased  rates  of  pay,  to  heavy  damage  claims  and 
unusual  expenditures  because  of  the  accidents  in  1913,  to 
increasing  demands  from  the  public  and  the  public  authori- 
ties for  service  and  to  more  severe  weather  conditions. 

An  increase  in  Maintenance  of  Way  expenses  due  to 
some  increase  in  rates  of  pay,  to  work  that  should  have  been 
done  early  in  the  year  1913,  and  to  more  work  upon  im- 
proved signals,  all  of  which  are  necessary  for  safety. 

An  increase  in  Maintenance  of  Equipment  expenses  due 
to  increased  rates  of  pay,  to  a change  in  the  method  of 
charging  depreciation  (which  results  in  an  additional 
annual  charge  to  operating  expenses  of  $500,000.),  to  re- 


5 


pairs  on  freight  cars  purchased  in  1906,  1907  and  1908,  now 
requiring  heavy  work  to  keep  them  in  suitable  condition, 
and  to  deferred  work  on  electrical  equipment. 

A decrease  in  revenue  from  Outside  Operations  due  al- 
most entirely  to  the  loss  of  revenue  from  parlor  and  sleep- 
ing cars  because  of  the  transfer  of  this  service  to  the 
Pullman  Company.  The  contract  was  made  with  that  com- 
pany in  order  to  provide  immediately  steel  parlor  and 
sleeping  car  equipment  and  to  relieve  the  New  Haven  Com- 
pany of  a very  large  investment  for  such  equipment.  All 
parlor  and  sleeping  cars  are  now  of  all-steel  or  steel-under- 
frame construction  and  practically  all  coaches  in  the 
through  New  York-Boston  trains  are  of  steel. 

A decrease  in  Other  Income  due  to  a decrease  in  or 
cessation  of  dividends  from  the  New  York,  Ontario  and 
Western,  from  the  trolleys,  and  from  the  steamships,  as 
these  companies  are  affected  adversely  by  the  same  causes 
that 'affect  the  New  Haven  Company;  also  to  a smaller 
amount  of  interest  on  bank  balances  due  to  smaller  deposits 
carried  by  the  company. 

An  increase  in  Fixed  Charges,  Rentals,  etc.,  estimated 


as  follows: 

Rentals $387,100  increase 

Miscellaneous  Taxes 10,600  “ 

Boston  Holding  Company  (on  account  of  no  divi- 
dends from  Boston  & Maine) 615,500  “ 

New  York,  Westchester  & Boston  guarantee 86,200  “ 

Boston  and  Albany  Agreement 103,100  “ 

Interest  on  Loans  (on  account  of  increased  amount 

of  short  term  notes,  bearing  6%) 1,008,600  “ 

Miscellaneous  49,000  decrease 


Total  increase  2,162,100  increase. 


The  increase  in  rentals  is  due  largely  to  the  constantly 
increasing  investment  in  the  Grand  Central  passenger  ter- 
minal at  New  York.  In  1903  the  payment  made  by  the  New 
Haven  Company  for  the  entrance  to  New  York  City  and  for 
the  use  of  the  passenger  terminal  was  $1,038,182.  For  the 
year  ending  June  30th,  1913,  it  was  $2,983,969,  or  about 
30c  for  each  passenger.  The  cost  will  be  more  for  the  year 
ending  June  30th,  1914. 


6 


Increases  in  Reports  to  the  Interstate  Commerce 

Rates  of  Pay  Commission  for  three  periods  five  years 
apart  show  as  follows: 


Average  yearly  wages  based 


Year 

No.  of  men  employed 
June  30 

Total 

Compensation. 

on  No.  of  men  employed 
June  30 

1903 

31,028 

$19,659,087 

$633.59 

1908 

31,735 

23,876,652 

752.38 

1913 

34,521 

28,151,433 

815.49 

Increase  in  number  of  men  employed — 1913  over  1903 — 11% 
“ total  compensation  — 1913  over  1903 — 43% 

“ average  yearly  wage  — 1913  over  1903 — 29% 


During  the  fiscal  year  ending  June  30, 1914,  the  increases 
in  rates  of  pay  will  have  increased  the  total  payroll  about 
8800,000  over  the  previous  year.  The  greater  part  of  these 
payroll  increases  have  been  the  result  of  awards  under  the 
Federal  arbitration  acts.  If  the  same  rates  of  pay  had  been 
in  effect  in  1913  as  in  1903,  the  total  payroll  for  the  year 
would  have  been  approximately  $7,200,000  less. 

Legislative  The  Federal  Nine-hour  Law,  the 

Acts  and  Ash-Pan  Law,  the  Safety  Appliances 

Requirements  Law,  the  Boiler  Inspection  Law  and  the 
Full-Crew  Law,  have  increased  the  ex- 
penses of  the  company  nearly  $200,000  per  year. 

The  cost  of  accounting  ten  years  ago  was  $190,000.  per 
year.  At  the  present  time  it  is  about  $500,000.  per  year. 
While  the  increase  in  business  has  had  its  effect  on  account- 
ing cost,  part  of  the  increase  is  due  to  the  accounting  re- 
quirements -of  the  Interstate  Commerce  and  State  Com- 
missions. 

The  recent  Federal  Act  requiring  the  valuation  of  rail- 
ways will  increase  the  expenses  of  this  company  about 
$60,000  per  year  for  several  years. 

These  facts  about  increased  rates  of  pay  and  the  re- 
quirments  by  the  government  are  not  referred  to  in  a spirit 
of  criticism,  but  to  show  the  effect  they  have  on  the  income 
of  the  Company. 


7 


If,  however,  the  people  through  their  governmental 
agencies  impose  these  expenses  upon  the  railroads  they 
must  provide  the  money  with  which  to  meet  them  by  in- 
creasing the  rates. 

Electrification  The  electrification  of  the  road  be- 

tween New  York  and  New  Haven  has 
been  very  costly,  and  until  the  work  is  completed  and  full 
electric  service  is  in  operation  any  possible  economies  can- 
not be  realized.  Any  further  electrification  must  be  post- 
poned because  of  lack  of  capital. 

Freight  and  Passenger  Rates. 

While  the  company  has  had  to  add  constantly  to  its 
capital  investment  and  to  increase  its  operating  expenses, 
the  freight  rates,  on  the  whole,  have  remained  stationary  or 
have  decreased.  In  ten  years,  there  has  been  a reduction  of 
69/1000  of  a cent  in  the  average  rate  received  for  hauling 
two  thousand  pounds  one  mile.  This  very  small  sum,  ap- 
plied to  the  freight  business  of  the  New  Haven  road  for  the 
year  ending  June  30th,  1913,  would  have  increased  freight 
earnings  $1,800,000. 

The  increase  in  wages  and  the  decline  in  freight  rates 
alone  make  a difference  of  over  $9,000,000  a year  in  income, 
equal  to  six  per  cent,  on  $150,000,000.  of  capital. 

The  New  Haven  road  is  unusual  in  the  relation  between 
its  freight  and  passenger  business.  Considering  the  rail- 
roads of  the  country  as  one  system,  two  tons  of  freight  are 
carried  for  each  passenger,  but  on  the  New  Haven  only 
one-third  of  a ton  is  carried  for  each  passenger. 

During  the  first  eight  months  of  this  fiscal  year  the  earn- 
ings from  passenger  trains  were  50.6%  and  the  earnings 
from  freight  trains  49.4%  of  the  revenue  from  transporta- 
tion service.  In  the  same  period  the  average  cost  (including 
taxes)  of  running  all  trains  one  mile  was  $2.12.  The  revenue 
per  passenger  train  mile  was  $1.90  and  per  freight  train 
mile  $4.17.  The  passenger  train  milqage  is  about  double 
the  freight  train  mileage,  so  that  the  disadvantage  of  the 


8 


V 


New  Haven  as  compared  with  roads  having  relatively  more 
freight  train  mileage  is  apparent.  The  passenger  train 
mile  revenue  is  adversely  affected  by  the  large  proportion 
of  passengers  carried  on  ‘ 4 commutation ’ ’ and  “trip”  tic- 
kets. These  passengers  comprise  43%  of  the  total  passen- 
gers carried,  and  they  yield  but  13.6%  of  the  total  passenger 
revenue. 

Because  of  the  low  passenger  fares,  both  through  and 
local,  and  because  of  the  increasing  costs  of  the  service, 
much  of  the  passenger  train  service,  is  operated  for  the  con- 
venience of  the  public  at  a loss.  Taken  as  a whole  the 
passenger  train  service,  just  about  pays  its  operating  ex- 
penses but  does  not  contribute  anything  directly  to  taxes 
and  interest.  The  fairness  of  increasing  passenger  rates, 
therefore,  is  obvious. 

The  average  revenue  from  each  passenger  carried  one 
mile  on  the  New  Haven  road  is  only  1.77  cents  and  the 
average  payment  per  passenger  is  only  32  cents.  This  low 
average  is  due  to  the  large  number  of  passengers  carried 
in  suburban  territory  at  rates  which  range  from  one-half 
cent  to  one  cent  per  mile. 

At  the  same  time  the  expenses  of  this  commutation 
traffic  are  particularly  heavy  on  account  of  the  very  burden- 
some cost  of  the  passenger  terminals  both  at  New  York  and 
Boston.  Notwithstanding  the  extremely  low  commuta- 
tion rates  the  efforts  of  some  of  the  public  authorities  have 
been  to  reduce  them  still  further.  The  Public  Service  Com- 
mission of  New  York  ordered  substantial  reductions  in  the 
very  low  commutation  rates  between  New  York  suburban 
points  and  New  York  City.  The  Supreme  Court  of  New 
York  set  aside  this  order,  but  the  New  York  Legislature, 
which  has  just  adjourned,  passed  on  act  making  the  same 
reductions. 

Mail  and  The  company  is  underpaid  for  the  car- 

Parcel  Post  riage  of  mail  and  parcel  post.  For  the 
carriage  of  mail  and  for  other  services 
performed  by  this  railroad  for  the  Post  Office  Department, 
the  government  is  now  paying  about  $725,000.  per  annum. 


9 


This  amount  includes  $21,000.  for  the  parcel  post.  This  is 
9%  less  than  the  payments  made  for  the  mail  service  dur- 
ing the  four-year  period  ending  June  30,  1909,  when  the 
parcel  post  was  not  in  operation.  A study  by  chartered 
accountants  made  three  years  ago  indicated  that  $1,400,000 
was  approximately  the  sum  to  which  the  company  was 
entitled  for  carrying  the  mail.  Instead,  it  was  receiving 
about  half  that  sum  and  since  then  the  parcel  post  has  been 
added  with  no  corresponding  increase  in  pay,  on  account 
of  which  the  railroad  is  receiving  at  least  $700,000  per 
year  less  than  it  is  fairly  entitled  to  for  carrying  mail  and 
parcel  post.  In  addition,  the  railroad  suffers  a further  loss 
in  its  express  earnings  because  of  the  effect  of  the  parcel 
post  on  the  business  of  the  express  companies.  Express 
revenues  are  also  adversely  affected  by  the  lower  rates  pre- 
scribed by  the  Interstate  Commerce  Commission,  effective 
February  1st,  1914. 

Grounds  for  Encouragement. 

In  considering  the  estimate  of  the  financial  results  for 
the  current  fiscal  year  three  things  must  be  borne  in  mind: 

First:  The  estimate  is  thought  to  be  conservative. 

Second:  The  position  of  the  Company  with  respect  to 
the  decrease  in  net  revenue  is  not  peculiar.  The  New 
Haven,  with  all  other  railroads  in  eastern  territory,  has 
suffered  a decline  in  its  revenue  with  many  increases  in  ex- 
penses which  are  beyond  the  control  of  the  management. 
For  the  seven  months’  period  ending  January  31st,  1914, 
compared  with  the  same  period  one  year  ago,  the  loss  in 
net  operating  income  on  thirteen  of  the  important  lines  in 
eastern  territory,  and  the  amount  of  each  dollar  of  gross 
earnings  absorbed  by  operating  expenses  and  taxes,  are 
as  follows: 


10 


Per  Cent 

of 

Decrease  in 

Net 

Operating 

Rev. 

Operating  Income 

Road. 

taken  by  Operating  Compared  with  Same 

Expenses  and 

Taxes. 

Period  last 

year. 

1914 

1913 

Decrease  Per  Cent. 

N.  Y.,  N.  H.  & H 

76.7 

70.8 

$3,446,620 

26.9 

New  York  Central  (Inc. 

B.  & A.)  80.9 

76.5 

3,160,002 

19.3 

Philadelphia  & Reading.. 

67.1 

60.4 

2,741,966 

22.4 

Baltimore  & Ohio 

76.2 

72.9 

2,227,430 

13.9 

Erie  

75.1 

68.6 

2,222,816 

22.3 

Pennsylvania  

78.5 

76.5 

1,979,615 

8.0 

Central  R.  R.  of  N.  J. . . . 

67.3 

59.7 

1,557,336 

22.3 

Boston  & Maine 

83.5 

80.4 

982,276 

16.7 

Lackawanna  

66.5 

63.8 

843,491 

9.1 

Delaware  & Hudson 

66.7 

61.7 

749,316 

13.7 

Boston  & Albany 

79.1 

73.8 

528,876 

19.5 

N.  Y.,  O.  & W 

75.6 

69.1 

436,936 

24.6 

Long  Island 

76.5 

75.2 

374,433 

17.5 

Third:  Prolonged  agitation  about  the  Company  and  its 
management,  causing  demoralization  and  loss  of  efficiency; 
serious  wrecks;  falling  earnings;  increased  wages  and 
costs;  higher  rates  for  money;  work  done  and  investments 
made  for  the  future  with  no  adequate  return  at  present;  de- 
mands for  more  elaborate  service  and  facilities;  uncertainty 
about  the  relations  with  the  Government;  all  form  a com- 
bination of  adverse  circumstances  not  likely  to  be  repeated. 

The  New  Haven  road  is  a great  property  with  many 
elements  of  strength.  It  serves  an  active,  prosperous  peo- 
ple and  many  industries,  and  in  times  of  fair  business 
throughout  the  United  States,  has  great  earning  power. 
With  a resumption  of  business — with  confidence  restored — 
with  help  from  State  and  Federal  authorities,  the  results 
should  be  much  better. 


Negotiations  With  the  Department  of  Justice. 

During  the  month  of  September,  1913,  information  was 
received  which  resulted  in  a conference  on  September  23rd 
between  the  Attorney-General  of  the  United  States  and  Mr. 
Elliott  about  a suit  contemplated  by  the  Federal  Govern- 
ment to  dissolve  the  New  Haven  system. 

On  October  3rd,  the  directors  appointed  committees  to 
investigate  and  report  upon  the  Connecticut  Trolleys,  the 
Rhode  Island  Trolleys,  the  Steamships,  the  Boston  and 


11 


• 

' 


. 


. 


. 


. ' 


✓ 


• i 

, ■ ' j • 

. - - . • ■ 

■ 


u 


Albany  agreement,  the  Massachusetts  Trolleys,  the  Boston 
& Maine,  and  to  confer  with  the  Attorney-General. 

On  October  9th,  this  latter  committee  (Howard  Elliott, 
chairman,  T.  DeWitt  Cuyler,  and  A.  T.  Hadley)  called  upon 
the  Attorney-General  and  the  Interstate  Commerce  Com- 
mission and  explained  the  active  work  being  done  by  the 
directors  about  the  serious  and  complicated  questions 
raised  in  the  report  of  the  Interstate  Commerce  Commis- 
sion and  by  the  Department  of  Justice. 

During  October,  November  and  December,  these  com- 
mittees did  a great  deal  of  work,  called  in  a number  of  ex- 
perts, and  there  were  numerous  interviews  between  repre- 
sentatives of  the  company  and  of  the  Department  of  Jus- 
tice. 


Demands  of  Department  of  Justice. 

On  December  13th,  in  answer  to  a request  of  the  Com- 
pany, the  Department  of  Justice  made  the  following 
statement  : 

“Suggestions  as  to  Demands  to  Be  Made  on  New  Haven: 

1.  That  the  New  Haven  absolutely  part  with 
its  stockholdings  in  the  Boston  and  Maine. 

2.  That  the  arrangement  between  the  New  Haven 
and  New  York  Central,  as  to  the  Boston  and  Albany, 
be  cancelled. 

3.  That  the  New  Haven  part  with  all  steamboat 
holdings. 

4.  That  the  New  Haven  part  with  all  its  trolley 
holdings. 

5.  The  New  England  Railroad  Company  as  it 
originally  existed  when  taken  over  by  the  "New 
Haven,  to  become  an  independent  system  and  oper- 
ated as  such.” 

Reply  by  These  demands  were  considered  care- 

New  Haven  fully  by  the  directors  and  on  January 
6th,  1914,  Mr.  Elliott  suggested  to  the 
Attorney-General  as  a basis  of  settlement  that  the  New 
Haven  would : 


12 


. - 

* . . 

' 

• ? r \ ••• 

1.  Part  with  its  interest  in  the  Boston  and 
Maine. 

2.  Cancel  the  arrangement  about  the  Boston  and 
Albany. 

3.  Leave  the  question  of  steamship  holdings  to 
the  Interstate  Commerce  Commission  as  per  con- 
versation with  the  Attorney-General  on  December 
13,  1913,  except  that  it  was  ready  to  part  with  its 
interest  in  the  Merchants  and  Miners  Transpor- 
tation Company  and  the  Eastern  Steamship  Cor- 
poration. 

4.  Part  with  its  interest  in  the  trolleys  in  the 
States  of  Massachusetts  and  New  York. 

5.  As  to  the  Connecticut  and  Rhode  Island  trol- 
leys: 

The  New  Haven  believes  that  it  should  retain  the 
so-called  Connecticut  and  Rhode  Island  trolleys,  for 
reasons  already  explained  verbally. 

These  properties  are  intrastate,  and  do  an  intra- 
state business  and  they  are  most  important  agencies 
for  the  general  development  in  Connecticut  and 
Rhode  Island  of  the  agricultural,  commercial,  and 
manufacturing  business  of  those  states.  They  are 
very  intimately  associated  with  the  New  Haven  Road 
as  such,  and  they  are  .a  distinct  help  in  connection 
with  the  New  Haven  Road  in  building  up  and 
handling  the  local  business  of  those  states. 

The  Department  has  stated  that  it  did  not  wish  to 
cause  any  greater  loss  of  values  and  greater  harm 
to  the  business  of  New  England,  and  of  her  trans- 
portation system,  than  was  reasonably  practicable. 

A plan  such  as  suggested  in  this  memorandum, 
if  a reasonable  time  is  allowed  for  liquidation,  will 
bring  about  most  of  the  results  desired  by  the  De- 
partment, with  a minimum  amount  of  harm  to  that 
section  of  the  country  and  to  its  transportation  in- 
terests, which,  just  now,  need  all  the  consideration 
and  aid  that  they  can  obtain  from  any  source. 


13 


Plan  of  These  suggestions  were  not  accept- 

January  10,  1914-  ceptable  to  the  Attorney-General,  and 
after  another  meeting  of  the  Board  of 
Directors  Chairman  Elliott  and  Director  Arthur  T.  Hadley 
were  authorized  and  instructed  to  return  to  Washington 
and  arrange,  if  possible,  a plan  of  settlement.  This  was 
done  on  January  10,  as  per  the  following : 

“Memorandum  Outline  of  Solution  of  New  England  Trans- 
portation Problem. 

1.  The  securities  (stock,  bonds  and  obligations) 
of  the  Boston  Railroad  Holding  Company  now  be- 
longing to  the  New  York,  New  Haven  and  Hartford 
Railroad  Company  are  to  be  put  in  the  hands  of 
liquidators  or  trustees,  with  direction  and  authority 
to  dispose  of  all  stocks  of  the  Boston  & Maine  Rail- 
road within  the  time  and  in  the  manner  to  be  agreed 
upon. 

2.  The  New  York,  New  Haven  and  Hartford  Rail- 
road Company  shall  dispose  of  all  stock  and  other 
obligations  held  by  it  in  all  leased  lines  of  the  Bos- 
ton & Maine  Railroad  within  the  time  and  in  the 
manner  to  be  agreed  upon. 

3.  The  agreement  between  the  New  York  Central 
and  Hudson  River  Railroad  Company  and  the  New 
York,  New  Haven  and  Hartford  Railroad  Company 
for  the  operation  of  the  lines  of  the  Boston  and 
Albany  Railroad  is  to  be  canceled. 

4.  The  New  York,  New  Haven  and  Hartford 
Railroad  Company  shall  dispose  of  all  stock  and 
other  obligations  held  by  it  in  the  Merchants  and 
Miners  Transportation  Company,  Eastern  Steam- 
ship Corporation,  and  Maine  Steamship  Company, 
within  the  time  and  in  the  manner  to  be  agreed  upon. 

5.  The  New  York,  New  Haven  and  Hartford 
Railroad  Company  shall  dispose  of  all  stock  and 
other  obligations  held  by  it  in  the  New  England 
Steamship  Company  and  the  Hartford  and  New 


14 


York  Transportation  Company  within  the  time  and 
in  the  manner  to  be  agreed  npon,  except  in  so  far 
as  its  petition,  heretofore  filed  with  the  Interstate 
Commerce  Commission  nnder  the  Panama  Canal 
Act,  may  be  granted. 

6.  The  question  of  the  disposition  of  wharves 
and  terminal  facilities  acquired  by  the  New  York, 
New  Haven  and  Hartford  Railroad  Company  in  its 
acquisition  of  various  boat  lines  to  he  settled  here- 
after. 

7.  The  New  York,  New  Haven  and  Hartford 
Railroad  Company  shall  dispose  of  its  interest  in  the 

New  York  & Stamford  Trolley  System 

Westchester  Street  Trolley  System 

Connecticut  Trolley  System 

Rhode  Island  Trolley  System 

Massachusetts  Trolley  System 
within  the  time  and  in  the  manner  to  be  agreed  upon. 

8.  An  agreed  decree  is  to  be  entered  in  the 
United  States  District  Court  for  the  Southern  Dis- 
trict of  New  York,  embodying  and  enforcing  the  de- 
tails of  the  contemplated  agreement  finally  reached. 

9.  The  above  is  intended  as  a mere  outline  of 
the  understanding  reached  between  the  Government 
and  the  New  York,  New  Haven  and  Hartford  Rail- 
road Company  that  the  latter  shall  be  completely 
divorced  from  the  ownership  and  management  of 
all  properties  above  referred  to. 

The  Department  of  Justice  recognizes  the  obli- 
gation incumbent  upon  directors  to  conserve  as  far 
as  circumstances  permit  the  value  of  stockholders  * 
property  and  protect  those  stockholders  from  the 
consequences  of  past  acts;  and  so  far  as  it  prop- 
erly may,  will  endeavor  to  aid  the  directors  in  dis- 
charging those  obligations.  The  New  York,  New 
Haven  & Hartford  Railroad  Company  assents  to  the 
above  plan  in  the  interest  of  a peaceful  solution  of 
the  so-called  ‘New  England  Railroad  Situation \ 
It  does  not  desire  this  action  to  be  construed  as  an 


15 


assent  to  or  dissent  from  the  principles  of  law  in- 
volved or  the  commercial  wisdom  of  the  proposed 
plan. ’ ’ 

The  directors  ratified  the  memorandum  on  January  15th 
and  authorized  the  employment  of  Messrs.  Moorfield  Storey 
of  Boston,  Walker  D.  Hines  and  John  W.  H.  Crim,  of  New 
York,  as  special  counsel  to  assist  Chairman  Elliott  in  com- 
pleting the  details  of  the  negotiation. 

On  February  2nd  a form  of  trust  deed  and  names  of 
trustees  for  the  Boston  Holding  Company  stock  were  sub- 
mitted to  the  Attorney-General.  He  thought  it  necessary 
to  consult  with  the  authorities  of  Massachusetts,  and  later 
the  authorities  of  New  Hampshire  desired  to  be  heard.  All 
of  this  negotiation  took  much  time  but  finally  on  Saturday, 
March  21st,  an  agreement  was  reached  as  outlined  in  the 
following  statement  prepared  by  the  Attorney-General: 

“Memorandum  of  the  Situation  in  Respect  of  the  New 

York,  New  Haven  and  Hartford  Railroad  Company. 

Agreement  The  Attorney-General  has  indicated  to 

of  March  21.  the  representatives  of  the  New  York,  New 
Haven  and  Hartford  Railroad  Company 
the  arrangements  which  he  thinks  would  result  in 
bringing  the  affairs  of  that  Company  into  harmony 
with  law.  The  representatives  of  the  Railroad  are 
willing  to  accept  the  requirements  indicated  and  to 
endeavor  to  put  them  into  effect  without  delay  if 
approved  by  the  stockholders  in  a meeting  to  be 
called  at  once. 

The  indicated  arrangements,  stated  in  general 
terms,  follow: — 

1.  The  Boston  Railroad  Holding  Company  is  a 
Massachusetts  corporation  holding  a majority  of  the 
stock  of  the  Boston  & Maine  Railroad,  and  ninety  per 
cent  of  the  former’s  stock,  in  turn,  is  owned  by  the 
New  Haven  Railroad.  The  charter  of  the  holding 
company  prohibits  it  from  disposing  of  the  Boston 


16 


and  Maine  stock.  The  legislature  of  Massachusetts 
will  be  asked  to  remove  this  prohibition  and,  if  this 
is  done,  the  stock  of  the  holding  company  will  be 
transferred  at  once  to  five  trustees,  and  after 
arrangements  have  been  made  to  protect  the 
minority  stock  of  the  holding  company,  they  shall 
sell  the  Boston  and  Maine  stock,  prior  to  January  1, 
1917. 

2.  The  stocks  of  the  companies  which  control  the 
Connecticut  and  Rhode  Island  trolleys  will  be  placed 
in  the  hands  of  trustees — five  for  each  state — and 
shall  be  sold  within  five  years  from  July  1,  1914. 

3.  The  majority  stock  of  the  Merchants  and 
Miners  Transportation  Company,  now  held  by  the 
New  Haven  Railroad,  will  be  placed  in  the  hands  of 
three  trustees  and  shall  be  sold  within  three  years 
from  July  1,  1914. 

4.  The  minority  stock  in  the  Eastern  Steamship 
Corporation  held  by  the  New  Haven  Railroad  shall 
be  sold  within  three  years  from  July  1,  1914,  and  in 
the  meantime  shall  be  deprived  of  voting  power. 

5.  Whether  the  New  Haven  Railroad  shall  be 
permitted  to  retain  the  Sound  Lines  will  be  sub- 
mitted to  the  Interstate  Commerce  Commission  for 
determination  under  the  provisions  of  the  Panama 
Canal  Act. 

6.  The  Berkshire  trolleys  shall  be  sold  within 
five  years  from  July  1,  1914- 

7.  A decree  embodying  the  foregoing  shall  be 
entered  in  the  United  States  District  Court  for  the 
Southern  District  of  New  York.  The  decree  shall 
further  provide  that  upon  application  of  the  New 
Haven  Railroad  or 'the  Trustees,  and  for  good  cause 
shown,  the  time  within  which  any  of  the  above-men- 
tioned stocks  shall  be  sold  may  be  extended  by  the 
Court. 

Trustees  satisfactory  to  all  parties  have  been 
suggested.  Those  proposed  in  connection  with  the 
Boston  & Maine  stock  have  signified  their  willing- 


17 


ness  to  serve  and  their  names  are:  Marcus  P.  Knowl- 
ton  and  James  L.  Doherty,  of  Springfield,  Mass.; 
James  L.  Richards  and  Charles  P.  Hall,  of  Boston, 
and  Frank  P.  Carpenter,  of  Manchester,  N.  H. 
Names  of  the  others  will  not  be  made  public  until 
acceptance  by  them  is  fully  assured. 

The  essential  reason  for  placing  the  properties  in 
the  hands  of  trustees  is  to  secure  their  immediate 
independent  management. 

The  outlines  of  the  proposed  decree  and  trust 
agreements  have  been  discussed  and  are  understood. 
Their  verbiage  remains  to  be  worked  out,  but  no 
difficulty  is  anticipated  in  that  respect. 

This  statement  has  the  approval  of  both  the  At- 
torney-General and  the  representatives  of  the  Rail- 
road.’ ’ » 

The  Attorney-General  insisted  that  the  holding  of  the 
properties  named  was  contrary  to  law,  but  throughout  the 
negotiations  realized  the  seriousness  of  the  situation  and 
expressed  an  earnest  desire  to  adjust  it  with  the  minimum 
amount  of  disturbance  to  business  and  loss  to  the  stock- 
holders of  the  New  Haven  road. 

General  Conclusions. 

This  recital  of  conditions  to  be  met  and  dealt  with  by 
the  directors  and  management  indicates  some  of  the  diffi- 
culties of  the  situation  and  must  be  considered  in  deciding 
what  the  Company  can  do. 

Suggestions  have  been  made  within  the  last  few  weeks 
by  the  press,  by  a limited  number  of  stockholders  and  by 
various  commercial  organizations,  that  the  Company  should 
have  let  the  Attorney-General  of  the  United  States  bring 
a general  dissolution  suit  instead  of  making  an  amicable 
adjustment. 

If  the  financial  plans  of  the  Company  had  not  failed,  if 
general  business  and  the  earnings  of  the  Company  had  not 
shown  such  discouraging  decreases,  and  if  there  had  been 


18 


a general  friendly  sentiment  and  feeling  of  confidence 
throughout  New  England  towards  the  Company,  the  direc- 
tors might  have  been  justified  in  contesting  the  Govern- 
ment’s right  to  insist  upon  the  dissolution  demanded. 

Under  the  conditions,  however,  confronting  the  Com- 
pany the  Directors  felt  that  a lawsuit,  with  attacks  which 
would,  without  doubt,  have  followed  from  other  sources, 
would  have  resulted  in  a receivership  of  the  property.  The 
Directors  have  felt  that  it  was  their  duty  to  the  stock- 
holders and  to  the  people  of  New  England  to  do  everything 
within  reason  to  avoid  this,  believing  that  the  results  of  a 
receivership,  with  its  complications,  entanglements,  and 
delays  would  be  disastrous,  not  only  to  the  properties  of  the 
Company,  but  to  the  commercial,  industrial  and  financial 
welfare  of  New  England. 

It  is  believed  that  the  information  contained  herein  as 
to  the  unfavorable  business  conditions,  and  the  serious  and 
difficult  character  of  the  Company’s  financial  necessities, 
will  aid  the  stockholders  in  understanding  why  the  Direc- 
tors feel  that  it  is  to  the  interest  of  the  stockholders  and 
of  the  people  of  New  England  to  make  this  adjustment 
with  the  Government. 

The  business  of  New  England  cannot  prosper  unless 
the  railroads  can  be  supported  so  as  to  furnish  the  facili- 
ties needed,  and  the  railroads  cannot  do  this  unless  the 
business  of  New  England  is  in  a healthy  condition;  the 
two  must,  of  necessity,  act  and  react  on  each  other. 

Today  no  improvements  are  being  made  except  those 
absolutely  necessary  for  safety,  and  work  already  author- 
ized is  stopped  or  postponed  wherever  possible.  Service  is 
being  curtailed  as  much  as  possible  and  every  economy  con- 
sistent with  safety,  reasonable  supervision  and  service  is 
being  pushed. 

In  round  figures,  the  properties  under  discussion  rep- 
resent upon  the  Company’s  books  more  than  $135,000,000 
of  value. 

The  report  of  the  Interstate  Commerce  Commission  on 
June  20th,  1913,  said,  in  regard  to  the  outside  properties 
of  the  New  Haven  : 


19 


“They  are  for  the  most  part  of  substantial  value 
and  in  many  instances  are  a kind  of  property  the 
value  of  which  should  improve.  The  financial  con- 
dition of  the  Company  calls  for  careful  consideration 
and  prudent  action  but  gives  no  occasion  for  hys- 
teria.” 

Your  Directors,  therefore,  hope  that  with  reasonable 
time  the  assets  of  the  Company  can  be  preserved,  the  earn- 
ing power  restored,  the  physical  condition  improved,  and 
the  Company  made  what  it  should  be,  a great  and  useful 
servant  of  the  people  of  New  England,  at  the  same  time 
paying  a return  to  its  owners.- 

The  real  question  today  is  not  whether  it  was  wise  or 
right  to  have  acquired  the  various  properties  under  dis- 
cussion, but  to  have  a policy  adopted  now  by  the  Company, 
by  the  people  whom  the  various  properties  serve,  by  the 
officers  and  agents  of  the  Government  both  State  and  Na- 
tional, and  by  the  press,  that  will  help  to  prevent  conditions 
that  might  bring  about  an  industrial  and  financial  crisis — 
a policy  that  would  at  least  give  a chance  to  save  a situa- 
tion filled  with  perplexities. 

Your  Directors,  by  unanimous  vote,  recommend  that  you 
approve  the  arrangement  with  the  Attorney-General.  It 
should  stop  the  charge  that  the  Company  is  openly  violat- 
ing the  law  and  should  make  it  easier  for  the  Company  to 
take  care  of  maturing  obligations  and  to  provide  additional 
capital  for  needed  improvements  in  signalling,  bridge  re- 
newals, additional  tracks,  equipment  and  modern  engine 
terminals.  It  should  also  permit  the  officers  of  the  Com- 
pany to  devote  their  time  and  energies  to  the  management 
of  the  property,  to  overcoming  the  ill  effects  of  long  con- 
tinued criticism,  and  to  bringing  about  a restoration  of 
that  confidence  which  is  so  essential  to  efficiency. 

The  security  holders  of  the  New  Haven  and  its  asso- 
ciated companies  (as  now  constituted)  number  at  least 
60,000,  and  the  employees  about  90,000;  with  those  depend- 
ent upon  them  they  represent  more  than  600,000  people  or 


20 


. 


' 


' 


about  one-eleventh  of  the  population  of  New  England,  and 
their  rights  and  interests  should  be  considered  carefully  by 
representatives  in  legislative  halls  and  executive  positions. 

The  six  New  England  states  have  one-fourteenth  of  the 
population  of  the  nation,  one-twelfth  of  the  national  wealth 
and  one-sixth  of  the  bank  deposits  anl  consume  one-eighth 
of  the  materials  of  manufacture.  They  must  have  first 
class  railroads. 

The  time  has  come  for  holders  of  securities,  employees, 
all  true  friends  of  New  England  to  use  their  influence  to 
help  the  transportation  system  by  insisting  upon  helpful 
cooperation  and  fair  treatment  from  all;  and  by  insisting 
that  rates  for  freight,  passenger,  mail  and  parcel  post  are 
sufficient  to  pay  modern  wages  and  taxes,  give  safe  and 
adequate  service,  permit  necessary  additions  and  improve- 
ments to  be  made,  and  pay  a good  return  to  the  holders  of 
the  securities. 


21 


APPENDIX. 

List  of  Stockholders. 


THE  NEW  YORK,  NEW  HAVEN  AND  HARTFORD  RAILROAD 

COMPANY. 

Classification  of  Capital  Stock, 

— as  of  — 

January  1,  1914. 


Shares  held  by  States: 

1914 

1913 

1912 

1911 

1910 

May  1. 

Massachusetts, 

573,782 

3634% 

35% 

35% 



36% 

Connecticut, 

288.624 

18  34 

19 

19 



17 

New  York, 

502,646 

32 

33 

34 



35 

Rhode  Island, 

42,949 

3 

3 

3 



3 

Miscellaneous, 

163,178 

10 

10 

9 

— 

9 

1,571,179 

100 

100 

100 

100 

Treasury, 

228,991 

Total  issue, 

1,800,170 

Number  of  Stockholders 

by  States : 

1914 

1913 

1912 

1911 

1910 

May  1. 

Massachusetts, 

12,238 

47% 

48% 

48% 



51  y% 

Connecticut, 

5,936 

23 

23 

23 



20 

New  York, 

4,110 

16 

15 

15 



143/2 

Rhode  Island, 

821 

3 

3 

3 

— 

334 

Miscellaneous, 

3,135 

11 

11 

11 

— 

1034 

26,240 

100 

100 

100 

100 

Distributed  as  follows : 


1914 

1913 

1912 

1911 

1910 

May  1. 

1 to  10  shs.  inc. 

11,860 

9,314 

8,698 

. 

— 

11  “ 50  “ “ 

9,661 

9,685 

8,626 

— 

*13,006 

51  “ 100  “ “ 

2,405 

2,348 

2,295 

— 

1,880 

101  “ 500  “ “ 

1,961 

1,995 

2,101 

— 

1,942 

501  “ 1,000  “ “ 

201 

228 

216 

— 

138 

1,001  and  over, 

152 

' 146 

170 

— 

93 

26,240 

22,716 

22,106 

18,652 

17,059 

Number  of  Stockholders  : 

1914 

1913 

1912 

1911 

1910 

May  1. 

Males, 

10,712 

8,185 

8,079 

— 

5,746 

Females, 

11,034 

10,102 

9,710 

— 

7,797 

Trusts  & Guardianships, 

3,663 

.3,666 

3,584 

— 

3,018 

Ins.  Cos.  & Other  corpns.  831 

763 

733 

June  1 

498 

Total, 

26,240 

22,716 

22,106 

18,652 

17,059 

Average  Shares  Per  Stockholder : 

1914 

1913 

1912 

1911 

1910 

59.9 

69.06 

71.32 

71.67 

71.44 

Secretary’s  Office, 
March  6th,  1914. 


* 1 to  50  shares  inclusive. 


22 


